The MAS said Singapore's economy was on track to meet the official forecast of 2-4 percent growth in 2015. People take photos with the skyline of the financial district of Singapore in the background on April 14, 2014. Reuters/Edgar Su

(Reuters) - Singapore's central bank on Tuesday surprised markets by holding off from further monetary easing, saying an improving outlook for global growth would underpin the trade-reliant economy.

The Monetary Authority of Singapore (MAS) said the city-state's economy was on track to meet the official forecast of 2-4 percent growth in 2015, and kept its projections for headline and core inflation unchanged.

"The outlook for the global economy has improved slightly, anchored by a stronger recovery in the G3," the MAS said in its half-yearly policy statement.

The central bank kept the slope, width and mid-point of the Singapore dollar's policy band unchanged and said it would maintain its policy of a "modest and gradual" appreciation of the Singapore dollar.

In January, the MAS had unexpectedly reduced the slope of its policy band for the Singapore dollar in an off-cycle move, saying the inflation outlook had "shifted significantly" following a plunge in global oil prices.

Analysts say the central bank appears comfortable with domestic growth and inflation trends even though the global outlook hasn't changed significantly since January.

"In their assessment of the global outlook, they seem to be a bit more optimistic than we are," said Chua Hak Bin, head of emerging Asia economics for Bank of America Merrill Lynch, adding slowdowns in China and Malaysia pose risks.

Indeed, the MAS seems to be taking a glass half-full stance on the economy, preferring a measured policy approach even as many global central banks have unleashed a wave of aggressive easings to boost growth and inflation.

Citing slowing growth and benign headline inflation, a majority of 25 analysts polled by Reuters had been expecting the MAS to ease policy on Tuesday. Some, including Chua, still see risks of an easing at the next policy review in October.

The MAS manages monetary policy by letting the Singapore dollar rise or fall against the currencies of its main trading partners within an undisclosed trading band based on its nominal effective exchange rate (NEER).


An estimate of first-quarter gross domestic product released on Tuesday showed that Singapore's economy grew an annualized 1.1 percent in January-March from the prior quarter, above expectations for 0.5 percent growth.

The Singapore dollar rallied after the surprise MAS decision, and was last at 1.3640 versus the U.S. dollar, up 0.5 percent on the day.

For the year, the Singapore dollar is still down about 2.8 percent against its U.S. counterpart, but has stabilized over recent weeks due to cooling expectations of an imminent U.S. interest rate rise.